China initiated an investigation into suspected monopolistic activities at the multinational technology company Alibaba Group Holding and summoned its affiliate Ant Group to a high-level financial regulation meeting, boosting pressure on the two pillars of billionaire Jack Ma’s internet empire.
The State Administration for Market Regulation is investigating Alibaba, the top antitrust watchdog said in a statement without providing further details. Regulators including the central bank and banking watchdog will separately summon affiliate Ant to a meeting intended to clarify the increasingly stringent financial regulations, which now pose a threat to the growth of the world’s biggest online financial services firm.
Ant said in a statement on its official WeChat account it will study and comply with all requirements.
Once hailed as drivers of economic growth and icons of the technological superiority of the country, after amassing hundreds of millions of users and gaining control over almost every aspect of everyday life in China, Alibaba and rivals like Tencent Holdings face growing pressure from regulators.
Investors are divided over the level to which China will go after Alibaba, the largest company in Asia after Tencent, and its rivals as the government of Xi Jinping prepares to introduce a set of new anti-monopoly regulations. The leaders of the country have said nothing about how harshly they plan to crack down or why they have decided to act now.
The draft laws published in November grant the government great powers to rein in tech entrepreneurs such as Mr. Ma, who until recently enjoyed an unusual amount of freedom to expand their empires.
“It’s clearly an escalation of coordinated efforts to rein in Jack Ma’s empire, which symbolized China’s new ‘too-big-to-fail’ entities,” said analysts. “Chinese authorities want to see a smaller, less dominant and more compliant firm.”
Since Ant’s initial public offerings was derailed, the Alibaba co-founder has all but vanished from public view. As of early December, with his empire under regulatory scrutiny, the man most closely identified with the rise of China was advised by the government to stay in the country, a person familiar with the matter has said.
The two firms, Alibaba and Tencent, dominate the country’s internet ecosystem and has been long shielded from competition by Google and Facebook. Their network of investments includes everything from artificial intelligence to digital finance. They have also groomed a new generation of titans including food and travel giant Meituan and Didi Chuxing, China’s Uber. Chinese companies that prosper without the support of these two companies are very rare with TikTok being a prominent one among the few.
The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a scenario of fines to a break-up of industry leaders. China’s diverse agencies now appear to be coordinating their efforts which is a bad sign for the internet sector.
The People’s Daily, the mouthpiece of the Communist Party, warned that fighting alleged monopolies was now a top priority. “Anti-monopoly has become an urgent issue that concerns all matters,” it said in a commentary coinciding with the probe’s announcement. “Wild growth” in markets needs to be curbed by law, it added.
In November, after Mr. Ma famously attacked Chinese regulators in a public address for lagging the times, the campaign against Alibaba and its peers got highly active. Ant’s IPO, the world’s largest at $35 billion, was eventually suspended by market overseers. The chances that Ant will be able to revive its massive stock listing next year are looking increasingly slim as China overhauls rules governing the fintech industry, which in past years has boomed as an alternative to traditional state-backed lending.
China is said to have separately set up a joint task force to oversee Ant, led by the Financial Stability and Development Committee, a financial system regulator, along with various departments of the central bank and other regulators. The group is in regular contact with Ant to collect data and other materials, studying its restructuring as well as drafting other rules for the fintech industry.